"Revolution in Egypt was shrugged off too easily by Gulf markets," said Hashem Montasser, managing partner at Frontlane Capital, a Dubai-based asset management firm.
"Markets were mispriced in the sense that risk premiums have gone up, but equities prices didn't reflect that. Bahrain has become the catalyst to now re-price Gulf equities."
Qatar's index fell 1.3 percent to 8,703 points, its lowest finish since Dec. 30.
"The market may test support at 8,500 points, but it is stable and should remain sideways until companies finish paying dividends," said Hani Girgis, assistant chief dealer at Dlala brokerage. "After Egypt and now Bahrain, investors are a little afraid of what will happen in the region. Investors are waiting for the Egypt exchange to re-open."
Commercial Bank of Qatar dropped 2.8 percent, Barwa Real Estate lost 1.4 percent and Qatar National Bank fell 2.9 percent.
The latter is down 8.2 percent since the central bank ordered conventional lenders to halt Islamic operations by the end of 2011. Few details have since emerged on how banks will comply and this uncertainty will weigh on shares, said Dlala's Girgis.
Bahrain's measure rose 0.6 percent to 1,475 points, but less than 48,000 shares change hands, the lowest level in at least two years, with investors largely absent.
The benchmark was down until the final minutes of trading, when a few thousand shares in National Bank of Bahrain (NBB) were bought, pushing its stock up 8.8 percent. NBB's shares were earlier down 1.5 percent.
Three other stocks traded. Ahli United Bank fell 0.6 percent, while Khaleeji Commercial Bank and Seef Properties ended flat.
The cost of insuring Bahrain's debt against default rose to fresh 18-month highs.
"Bahrain has heightened risk for at least the next couple of months," said Montasser. "As risk premiums rise, equity values should fall. Part of valuing any company is looking at the risk profile associated with its cash flow."
Egypt's bourse has been shut since Jan. 27, and its re-opening has been postponed three times.
